Alphen aan den Rijn (February 24, 2010) - Wolters Kluwer, a market-leading global information services company focused on professionals, today released its 2009 full-year results.
Highlights
include growing revenues, a solid operating margin, and strong free cash flow.
Financial Highlights
Revenue growth of 2% to €3,425 million; underlying revenue down 3% reflecting the economy’s
impact on transactional and cyclical product lines
Electronic revenues grew 8% and now represent 52% of total revenues
Ordinary EBITA margin of 20% in line with guidance
Springboard program delivered an incremental €68 million in savings, exceeding expectations
Free cash flow up 7% with strong cash conversion of 96%, exceeding guidance
Diluted ordinary earnings per share were €1.45 (€1.41 in constant currencies in line with guidance)
Net debt reduced by 11%, net-debt-to-EBITDA ratio reduced to 2.9 times
Proposed dividend up 2% to €0.66 per share
Looking Forward
Strategy 2010-2012 Maximizing Value for Customers sets path to capture growth opportunities
Outlook for 2010: Good growth in electronic revenues continues, improving ordinary EBITA margin, strong free cash flow, and diluted ordinary earnings per share of €1.41-€1.45 at constant currencies.
Key figures 2009 full-year
(All amounts are in millions of euros unless otherwise indicated)
Full Year 2009 2008 / / CC
Revenues 3,425 3,374 2% 0%
Electronic revenues % of total 52% 49%
Ordinary EBITA 682 678 1% 0%
Ordinary EBITA margin (%) 19.9% 20.1%
Ordinary net income 427 423 1% 0%
Diluted EPS (€) 0.40 1.09 (63%) (65%)
Diluted ordinary EPS (€) 1.45 1.47 (1%) (2%)
Free cash flow 424 395 7% 2%
> - % Change; > CC - % Change constant currency (EUR/USD = 1.47)
Nancy McKinstry, CEO and Chairman of the Executive Board, commented on the performance:
“Wolters Kluwer delivered good operating performance in 2009 despite continued challenging economic conditions. Our resilient subscription portfolio delivered good performance underpinned by stable retention rates and solid growth in electronic and services subscription revenues. Our strong growth in
cash flow and solid operating margins supports our continued investment of 8-10% of our revenues in future growth opportunities.
2009 marked the completion of our 2006-2009 strategy. We have successfully transformed our portfolio by growing online and software solutions, extending our market positions in high-growth adjacent segments, and leveraging our global scale to achieve operating efficiencies.
Looking forward, we expect 2010 to be characterized by a slow but steady economic recovery. In this context, electronic revenues are expected to continue to deliver good growth as our customers increasingly demand intelligent workflow tools, pressures on our transactional and cyclical revenues will ease with better market conditions, and our Springboard operational excellence program will continue to deliver further benefits, supporting continuous improvement in our operating performance.
Our clear strategic focus as well as our strong balance sheet supports our long-term strategy for growth.”
Revenue growth components
(All amounts are in millions of euros unless otherwise indicated)
Full Year % of
Total 2009 2008 / / CC / OG
Electronic & service subscription 46% 1,588 1,430 11% 9% 3%
Print subscription 16% 563 606 (7%) (7%) (7%)
Other non-cyclical 9% 293 277 6% 5% (3%)
Total recurring revenues 71% 2,444 2,313 6% 4% 0%
Books 10% 331 341 (3%) (4%) (4%)
Cyclical product lines 19% 650 720 (11%) (11%) (11%)
Total revenues 100% 3,425 3,374 2% 0% (3%)
> - % Change; > CC - % Change constant currency (EUR/USD = 1.47); > OG – % Organic growth
Wolters Kluwer revenues grew 2% in 2009. Key strategic acquisitions contributed growth of 3% while underlying revenues declined 3%, largely reflecting the economy’s impact on transactional and cyclical product lines and soft new sales. The positive impact of currencies as compared to the prior year contributed 2% to total growth.
Underlying recurring revenues, which include subscription and other non-cyclical revenues (approximately 71% of total revenues), were broadly in line with the prior year. With stable retention rates across the business, subscription revenues showed a solid performance compared with the
previous year, including 3% organic growth in electronic and services revenues. This growth helped to mitigate the impact of print subscription decline and soft new sales for subscriptions and other noncyclical
products, due to recessionary market conditions. Other non-cyclical products include services related to software.
Cyclical product lines (approximately 19% of total revenues) declined by 11%, due to a contraction in advertising and pharma promotional revenues, declining transaction volumes in corporate lending and business formation products, and weakness in other cyclical product lines including training and
consulting. Underlying book revenues declined 4% driven by soft demand in Europe and North American legal and tax and accounting markets and the order timing impact of moving distribution from a traditional wholesaler to a direct online partner in Health & Pharma Solutions.
Despite these conditions, customers continue to demand integrated online and software solutions which drove 8% growth in electronic products, including subscription and transactional product lines.
Electronic revenues now comprise 52% of total revenues up from 49% in the prior year.
The company delivered consistent profitability notwithstanding the impact of the economy on highmargin cyclical product lines. Ordinary EBITA was in line with the previous year and the ordinary EBITA margin remained a resilient 20%. This performance was driven by growth in electronic and service
subscription products, the contribution of high-margin acquisitions, tight controls on personnel and other costs, and operational excellence programs, including Springboard. As a result, diluted ordinary earnings per share were €1.45 (€1.41 in constant currencies in line with guidance).
In 2009, free cash flow totaled €424 million, representing 7% growth overall and 2% growth in constant currencies. This performance was largely driven by strong year-end cash collections across all divisions and diligent management of working capital. Wolters Kluwer’s resilient portfolio and strong cash
generation continue to support a solid financial position. Year-end net debt was reduced to €2,007 million (2008: €2,254 million) representing a net-debt-to-EBITDA ratio of 2.9 (2008: 3.2).
The reduction in the net-debt-to-EBITDA ratio was in line with management’s intention to move closer to its target of 2.5 times net-debt-to-EBITDA over the medium term. Prior year debt refinancing at attractive rates extended the maturity profile out beyond 2013, ensuring a strong liquidity position and
sufficient headroom in excess of the company’s €500 million policy minimum.
Dividend
At the 2010 Annual General Meeting of Shareholders, Wolters Kluwer will propose a dividend distribution of €0.66 per share, a 2% increase over last year, to be paid on May 4, 2010.
Springboard
The progress of the Springboard operational excellence program during the year exceeded expectations.
Total cost savings increased by €68 million to €84 million for the full year (2008: €16 million). Related exceptional costs totaled €70 million. The expansion and acceleration of supply management initiatives in
Europe contributed positively to the program results as did further business optimization initiatives in France, the Netherlands, the United Kingdom, and Law & Business.
Annualized run rate savings estimates for the full program are expected to reach €140-160 million by 2011.
The program is designed to further optimize the business resulting in sustainable margin improvement.
Savings are expected to result largely from standardized technology platforms and consolidated IT infrastructure, streamlined content manufacturing processes, expanded global sourcing programs, and increased use of offshore service centers for software development and testing, content production, and
back-office support functions.
Non-recurring program costs of €220-240 million over the four-year period will be treated as exceptional and include costs related to IT system migration and implementation, outsourcing migration costs, costs related to reengineering the content creation process, and also include severance and property consolidation costs.
2010 Outlook
Key Performance Indicators 2010 Guidance
Ordinary EBITA margin 20-21%
Free cash flow1 L €400 million
Return on invested capital L 8%
Diluted ordinary EPS1 €1.41 to €1.452
¹In constant currencies (EUR/USD = 1.39)
22009 diluted ordinary EPS in 2008 constant currencies (€1.41) has been recalculated to €1.43
using 2009 constant currencies rate of EUR/USD = 1.39 (2008 constant currency rate: EUR/USD =
1.47).
Wolters Kluwer began to see stabilizing market conditions at the close of 2009. While customers continue to be cautious and selective with incremental spending, the negative trends experienced in
cyclical product lines over the last eighteen months began to ease. Fourth-quarter transaction volumes
in corporate lending and business formation products were largely in line with the prior year.
Looking forward to 2010, Wolters Kluwer expects market conditions will continue to stabilize with a
slow but steady recovery expected. North American business units are likely to see an earlier recovery
compared to Europe, where improvements in trading conditions continue to be uneven. Northern and
Central and Eastern Europe will likely see a return to normalized economic conditions ahead of
Southern Europe.
2010 recurring revenues, including subscription and other non-cyclical revenues, are expected to
benefit from resilient retention rates partially offset by the impact of weaker 2009 new sales. Cyclical
revenues (approximately 19% of the portfolio) are expected to stabilize in 2010 with the exception of
advertising where continued weakness is expected, particularly in Europe. Book products
(approximately 10% of the portfolio) are also expected to show stability. Electronic revenues are
expected to continue to show good growth as customers demand online information and software
solutions to drive efficiency.
The ordinary EBITA margin is expected to be 20-21% in 2010. Improving margins will be underpinned by
the migration of revenues to more profitable electronic products and the continuing contribution of the
Springboard program. These efforts are expected to offset wage and other inflationary expenditures.
As in prior years, management will continue to invest approximately 8-10% of revenues in new products
and platforms to drive future growth.
Free cash flow will continue to be strong and is expected to be €400 million or greater. Diluted
ordinary earning per share is expected to be between €1.41 and €1.45 in constant currencies and will
be impacted by a higher effective tax rate of 25% (2009: 24%) as higher tax rate markets are expected
to lead in the recovery. Finance expenses in 2010 are expected to be approximately 10% higher than
2009, which benefited from favorable foreign currency movements.
2010-2012 Strategy
The 2010-2012 strategy for Maximizing Value for Customers is an important next step for Wolters
Kluwer. The strategy is focused on helping professionals deliver better results by providing them with
superior information and intelligent software solutions. These solutions provide value by reducing
complexity, enhancing the accuracy of critical decisions, and improving the productivity of the
professional. Also, the company can capitalize on key growth opportunities and expand its leading
global market positions.
The company will achieve this objective by delivering against three strategic priorities:
Deliver Value at the Point-of-Use by helping customers manage complex decisions and
transactions to produce accurate results. While high-quality proprietary information will
remain at the core of its products, the company is building tools and solutions that are
designed to help customers manage critical processes and increase the effectiveness of their
results.
Expand Solutions across Processes, Customers, and Networks by following the transaction
flow of the professional customers and delivering solutions across key activities. Over time,
these products are evolving towards intelligent solutions and collaborative networks,
essentially products which incorporate the company’s superior content into the customer’s
workflows and through innovative technology facilitate the communication and collaboration of
customers with their clients, government agencies, and other constituents.
Raise Innovation and Effectiveness through Global Capabilities by aligning Wolters Kluwer
businesses and operations with its strong global market positions to create four global divisions:
continue to be cautious and selective with incremental spending, the negative trends experienced in
cyclical product lines over the last eighteen months began to ease. Fourth-quarter transaction volumes
in corporate lending and business formation products were largely in line with the prior year.
Looking forward to 2010, Wolters Kluwer expects market conditions will continue to stabilize with a
slow but steady recovery expected. North American business units are likely to see an earlier recovery
compared to Europe, where improvements in trading conditions continue to be uneven. Northern and
Central and Eastern Europe will likely see a return to normalized economic conditions ahead of
Southern Europe.
2010 recurring revenues, including subscription and other non-cyclical revenues, are expected to
benefit from resilient retention rates partially offset by the impact of weaker 2009 new sales. Cyclical
revenues (approximately 19% of the portfolio) are expected to stabilize in 2010 with the exception of
advertising where continued weakness is expected, particularly in Europe. Book products
(approximately 10% of the portfolio) are also expected to show stability. Electronic revenues are
expected to continue to show good growth as customers demand online information and software
solutions to drive efficiency.
The ordinary EBITA margin is expected to be 20-21% in 2010. Improving margins will be underpinned by
the migration of revenues to more profitable electronic products and the continuing contribution of the
Springboard program. These efforts are expected to offset wage and other inflationary expenditures.
As in prior years, management will continue to invest approximately 8-10% of revenues in new products
and platforms to drive future growth.
Free cash flow will continue to be strong and is expected to be €400 million or greater. Diluted
ordinary earning per share is expected to be between €1.41 and €1.45 in constant currencies and will
be impacted by a higher effective tax rate of 25% (2009: 24%) as higher tax rate markets are expected
to lead in the recovery. Finance expenses in 2010 are expected to be approximately 10% higher than
2009, which benefited from favorable foreign currency movements.
2010-2012 Strategy
The 2010-2012 strategy for Maximizing Value for Customers is an important next step for Wolters
Kluwer. The strategy is focused on helping professionals deliver better results by providing them with
superior information and intelligent software solutions. These solutions provide value by reducing
complexity, enhancing the accuracy of critical decisions, and improving the productivity of the
professional. Also, the company can capitalize on key growth opportunities and expand its leading
global market positions.
The company will achieve this objective by delivering against three strategic priorities:
Deliver Value at the Point-of-Use by helping customers manage complex decisions and
transactions to produce accurate results. While high-quality proprietary information will
remain at the core of its products, the company is building tools and solutions that are
designed to help customers manage critical processes and increase the effectiveness of their
results.
Expand Solutions across Processes, Customers, and Networks by following the transaction
flow of the professional customers and delivering solutions across key activities. Over time,
these products are evolving towards intelligent solutions and collaborative networks,
essentially products which incorporate the company’s superior content into the customer’s
workflows and through innovative technology facilitate the communication and collaboration of
customers with their clients, government agencies, and other constituents.
Raise Innovation and Effectiveness through Global Capabilities by aligning Wolters Kluwer
businesses and operations with its strong global market positions to create four global divisions:
Medium-Term Outlook
Over the medium term, professionals will continue to demand productivity solutions. Beyond
information, they will seek intelligent solutions that provide answers and results. Traditional print
revenues are expected to continue to decline as customers adopt Wolters Kluwer’s innovative
solutions. The company anticipates double-digit growth in online and software revenues over the
medium term. Online, software, and services revenues are expected to grow to represent at least 75%
or more of total revenues.
As a result of the shift toward higher margin electronic solutions and the additional contribution from
operational excellence initiatives including the Springboard program, the company expects to deliver
steadily improving operating margin performance over the medium term. Ordinary EBITA and diluted
ordinary earnings per share will improve continuously over the period in constant currencies. Free cash
flow is expected to be equal to or greater than €400 million per annum in constant currencies
reflecting the resilient and growing subscription base. Return on invested capital will exceed 8%.
Key Performance Indicators Mid-term outlook
Revenue growth/ portfolio
composition
Double-digit online & software growth
Online, software & services revenues L75% of total revenues
Ordinary EBITA Continuous improvement
Diluted ordinary EPS1 Continuous improvement
Free cash flow1 L 400 million per annum
Return on invested capital L 8%
¹In constant currencies (EUR/USD = 1.39)
